sap implementation in construction organization - the traps
TRANSCRIPT
SEMINAR-II
SAP Implementation in Construction Organization - the Traps
Submitted By:
(Hemal S Shah, CP1908)
Guided By:
(Mrs. Jyoti Trivedi, Lecturer)
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M.Tech Programme in Construction & Project Management
CEPT University
Ahmedabad-380009
Table of Contents
ACKNOWLEDGEMENT ......................................................................................... 4
CERTIFICATE .......................................................................................................... 5
CHAPTER-1 INTRODUCTION ........................................................................... 6
1.1 NEED FOR STUDY......................................................................................................................6
1.2 OBJECTIVES..............................................................................................................................6
1.4 METHODOLOGY........................................................................................................................7
1.5 RESEARCH PLAN.......................................................................................................................7
CHAPTER-2 LITERATURE REVIEW ............................................................... 8
2.1 MOST COMMON PROBLEMS IN SAP IMPLEMENTATION, [1].................................................8
2.2 TOP TEN SAP PROBLEMS, [2]................................................................................................10
2.3 PROBLEMS FROM CASE STUDY BASED ON TECHNOLOGY & ORG. STAFF FACTOR, [3]......11
2.3.1 TECHNOLOGY FACTORS.......................................................................................................................................11
2.3.2 PEOPLE FACTORS.................................................................................................................................................12
2.4 KNOWLEDGE INTEGRATION AS A KEY PROBLEM IN SAP IMPLEMENTATION, [4].............13
2.5 RESEARCH GAP.......................................................................................................................13
CHAPTER-3 DATA COLLECTION .................................................................. 14
METHODOLOGY............................................................................................................................14
3.1 SAP INTEGRATION AT AEL (ADANI ENTERPRISE PVT. LTD. )...........................................15
3.2 SAP IMPLEMENTATION REQUIREMENT................................................................................17
3.3 PROBLEMS DURING SAP IMPLEMENTATION AT ADANI.......................................................18
3.4 SAP IMPLEMENTATION RISKS...............................................................................................28
3.4.1 OPERATIONAL RISK..............................................................................................................................................29
3.4.2 ANALYTICAL RISK...............................................................................................................................................30
3.4.3 ORGANIZATIONAL RISK.......................................................................................................................................31
3.4.4 TECHNICAL RISK..................................................................................................................................................32
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CHAPTER-4 DATA ANALYSIS ......................................................................... 33
CHAPTER 5 CONCLUSION .............................................................................. 38
5.1 RECOMMENDATION................................................................................................................38
5.2 CONCLUSIONS.........................................................................................................................38
APPENDIX- A.................................................................................................................................39
REFERENCES............................................................................................................................41
List of Figures
Figure 1 Employees Technical Expertise at Various Stages of SAP Implementation..................18
Figure 2 Firms Employees Status after SAP Implementation.......................................................20
Figure 3 Port Management Information System..........................................................................22
Figure 4 Terminal Operating System...........................................................................................24
Figure 5 Budgeted vs Actual Cumulative Cost of Implementation...............................................26
List of Tables
Table 1 Top Ten SAP risks ranked by mean of likelihood............................................................34
Table 2 Top ten SAP risks ranked by mean of Impact..................................................................34
Table 3 Top 16 SAP exploitation risks..........................................................................................36
Table 4 SAP Risk Mitigation Strategies.......................................................................................37
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ACKNOWLEDGEMENT
I would like to thank Mrs. Jyoti Trivedi, Faculty of Technology, CEPT University, Ahmedabad
for her valuable guidance and continual encouragement throughout the entire duration of seminar
preparation. I am heartily thankful to her for her timely suggestions and the transparency of the
concepts of the topic that helped me a lot in concluding this study.
I would also like to thank Mr. Ashwin Oza, SAP implementation consultant, Adani,
Mr. Tarang Bhargav, as well as Mr. Keyur Shah, SR Manager, Jai Hind Projects for spending
their precious time for guiding me during my whole seminar work and make me aware of
problems occurring during SAP implementation.
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CERTIFICATE
This is to certify that the Comprehensive Report on the “SAP implementation in construction
industry-The Traps”, carried out by Hemal Shah (CP1908), towards the partial fulfillment of the
requirements for the degree of M.Tech in Construction & Project Management of CEPT
University, Ahmedabad, is the record of work carried out by him under my supervision and
guidance during III-semester (Aug-Dec’09). In my opinion, the submitted work has reached a
level required for being accepted for Seminar-II Final Jury examination.
Mrs. Jyoti Trivedi
Lecturer,
CEPT University,
Ahmedabad.
Hemal S Shah
CP1908
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Chapter-1 Introduction
SAP Systems are one of the most widely used and misunderstood IT systems that are available
today. SAP is the concept of building applications which are fully integrated, that can be used to
automate many of the routine functions of running the company. Companies typically purchase
these systems in an effort to consolidate their data and information flow into one system or
database. In an environment that is currently not running SAP systems, the data is decentralized
into many smaller subsets of system, servers and/or databases. By having everything separate, it
limits the amount of integration and collaboration that can be done. IT functions such as disaster
recover, data warehousing, backups and data updates must be done on each individual system,
rather then on one SAP System. There are many examples of successful implementations of SAP
Systems, but unfortunately, almost as many examples of unsuccessful ones. A tremendous
amount of planning needs to be done prior to bringing this type of system in house, to ensure that
it will really meet the business objectives of the company, while not forcing unwanted processes
on departments that are not inclined to change the way they do business.
1.1 Need for Study
SAP implementations are full with tales of lost millions and withdrawals after implementation.
Many of the most experienced IT organizations have failed. So what are the secrets? What are
the traps? This question could produce at least a book, and probably a sequel. Here are a few
things the Vendor is not going to tell you about. They are by no means the most important, but
they are missed in many implementations.
1.2 Objectives
1. Find out problems generated during SAP implementation in construction organization.
2. To suggest probable solution to overcome the traps of SAP.
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1.4 Methodology
(a) Literature Review:
The literature is available for past few years by eminent researchers in the area of SAP will be
reviewed from published paper of journals, codes of practice and standard books.
(b) Data collection:
Data will be collected pertaining to Problems phased by organization during SAP
implementation. For this particular one construction organization will be selected who has
implemented SAP in their organization and based on questionnaire survey data will be collected
pertaining to SAP problems.
(c) Data analysis:
Based on the collected data from case study analysis will be made to identify the traps during
SAP implementation in any construction firm.
(d) Conclusion:
Based on the analysis relevant conclusions will be made and scope for the future work will be
suggested.
(e) Scope of work:
In this seminar scope of work will be limited up to identifying problems regarding SAP
implementation in any organization.
1.5 Research Plan:
Literature Review: 17 September
Data collection & Data Analysis: 10th October
Conclusion: 25th November
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Chapter-2 Literature Review
SAP packages touch many aspects of a company’s internal and external operations.
Consequently, successful deployment and use of SAP systems are critical to organizational
performance and survival. This study presents the problems and outcomes in SAP projects. Main
question addressed here is, what problems do SAP adopters encounter as they implement and
deploy SAP and how are these problems related to outcomes? Companies experience problems
at all phases of the SAP system life cycle and many of the problems experienced in later phases
originated earlier but remained unnoticed or uncorrected. These literatures suggest that
researchers and companies will do well to adopt broad definitions and multiple measures of
success and pay particular attention to the early identification and correction of problems.
2.1 Most Common Problems in SAP Implementation, [1]
Even the most experienced organizations in information technology domain have had futile
experiences in the implementation of the SAP systems. This article highlights some of the issues
which are presumed consequential to problems at later stage, they are by no means the most
important, but they are missed in many implementations.
Change Management and Training.
This was mentioned as the major problem with implementations. Changing work practices to fit
the system is a major difficulty. Also mentioned were training across modules and starting
training sooner.
To BPR or not to BPR
It is difficult to draw the line between changing Business Processes to suit the system or
retaining Business Processes and paying the cost, in dollars and time, to change the system. As
time and cost squeeze the implementation, the usual path is to not modify the system, but to
change the way people work. This feeds back into Change Management and Training.
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Poor Planning
Planning covers several areas such as having a strong Business Case, to the availability of Users
to make decisions on configuration, to the investing in a plan that captures all the issues
associated with implementing it.
Underestimating IT skills
As most people are upgrading from old technology, the skills of the staff need to be upgraded as
well. The upgrade is also going to place significant demands on a team who are geared to
maintain an old but stable environment. Usually this effort is underestimated.
Poor Project Management
Very few organizations have the experience in house to run such acomplex project as
implementing a large-scale integrated solution. It usually requires outside contractors to come in
and manage such a major exercise. It can be a fine line between abdicating responsibility and
Sharing responsibility.
Many consulting firms do a disservice to their clients by not sharing the responsibility.
Technology Trials
The effort to build interfaces, change reports, customize the software and convert the data is
normally underestimated. To collect new data, and clean the data being converted, will also
require an effort that i s beyond what is normally expected.
Low Executive Buy-in
Implementation projects need Senior Executive involvement to ensure the right participation
mix of Business and IT, and to resolve conflicts.
Underestimating Resources
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Most common budget blow outs are change management and user training, integration testing,
process rework, report customization and consulting fees.
Insufficient Software Evaluation
This involves the surprises that come out after the software is purchased. Organizations’ usually
do not do enough to understand what, and how the product works before they sign on the bottom
line. The Bleeding Edge SAP is so massive and integrated that reporting and linking to other
systems (either your own or your customers and suppliers) can be much more difficult than you
expect. Companies looking at SAP need to examine how they accept online feeds from a
customer and examine the technological enablers as well as the implications of these
technologies inside of the Business.
2.2 Top ten SAP problems, [2]
1. Cannot receive enough technical support from system vendors.
2. SAP system is not able to seamlessly integrate with other information system.
3. Outdated and duplicated data is not properly discarded.
4. Managers cannot retrieve needed information from the system.
5. Cannot receive proper consulting advice from system consultants.
6. Ill-defined or misfit with business strategy.
7. Fail to use SAP to predict actual demands of new products.
8. Fail to use the system to generate appropriate financial budgets.
9. SAP is not properly modified to meet new business requirements.
10. Seamless integration is not achieved between modules of SAP.
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2.3 Problems from case study based on technology & Org. staff factor, [3]
2.3.1 Technology Factors
Poor selection of the Software
SAP R/3 was originally designed for manufacturing companies and not for wholesalers,
especially those doing large number of transactions. R/3 has never been used by a distributor
until that time. It lacked many requirements needed for successful wholesale distribution. SAP
R/3 was inflexible software, and any modification required time and financial investment. R/3
was unable to handle the large number of orders. FoxMeyer filled orders from thousands of
pharmacies, each of which have had hundreds of items, totaling up to 500,000 orders per day.
The legacy system handled 420,000 orders per day, but SAP only processed 10,000 orders daily
(2.4% of that of the legacy system).
No restructuring of the business process was doneSAP was not fully integrated because FoxMeyer was incapable of reengineering their business
processes in order to make the software more efficient. FoxMeyer signed a 5-year, $5 billion
contract with a new customer, University Health System Consortium in July 1994, on the
assumption that a projected US$40m in benefits from the SAP implementation would be
materialized. They placed a higher priority on meeting that customers’ need than on making the
SAP implementation success. The delivery was scheduled to start in early 1995, but FoxMeyer
pushed the implementation deadline forward 90 days to meet their customers’ needs. Thus,
FoxMeyer sacrificed the needed business reengineering processes.
Insufficient testing Due to the rushed schedule, some modules testing were skipped. Besides, the system was not
properly tested to identify its shortcoming in handling large amounts of orders. There was
inadequate testing and insufficient time to debug the system to ensure its functionality.
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2.3.2 People Factors
No consideration of other consultants’ adviceFoxMeyer did not listen to other consultants’ advice in the early stage of the project, A Chicago-
based consultant firm warned FoxMeyer that SAP would not be able to deliver what FoxMeyer
needed. FoxMeyer selected SAP mainly because of its reputation.
Over-ambitious project scopeThe project team members and information system staff were unfamiliar with the R/3 hardware,
systems software and application software. The project scope was enlarged with simultaneous
implementation of a $18m computerized warehouse project. Some technical problems of great
complication and were not managed well by the IS people, so additional expenditures and time
were incurred.
Dominance of IT specialists’ personal interest
Since the project was new for the wholesaling industry, the IT specialists wanted to learn the
system and secure their employment in the SAP technology business. (The SAP experience made
them more employable). They placed their personal interest of getting experience in SAP
implementation over the company¡¯s interest in getting suitable software technology. So some
system problems were hidden and not reported to management until it was too late.
Poor Management supportInitially management was supportive and committed to the project. However, once the
implementation started, management was reluctant to acknowledge the system problems.
Management failed to understand the complexity and risks in the process and agreed to have 90
days early implementation although the system was not fully tested. Management failed to
recognize the timelines and resources required in the implementation process.
Lack of end-user cooperationThe user requirements were not fully addressed and there was no training for end users.
Employees had no chance to express their priorities and business needs. Workers especially at
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the warehouses were threatened by the implementation. The automated warehouse created many
problems. Employee morale was low because of the layoffs.
They knew their jobs were soon to be eliminated. As the end users were not fully involved, they
felt they didn’t have the ownership for the project and did not work closely with the IT
specialists to solve problems.
2.4 Knowledge Integration as a Key Problem in Sap Implementation, [4]
Knowledge integration is a key problem in a SAP implementation. The need for knowledge integration continues even after implementation, if the system is to be fully appropriated. Moreover, our study finds that knowledge integration does not happen automatically as the implementation of SAP is not merely a technological task influenced by users. Perceived usefulness, but a cross-functional knowledge integration process structurally enabled by the establishment and maintenance of knowledge-based social relationships intra- and inter-organizationally. For this study, an implementation process of six months. Duration was examined to explore the impediments encountered. While the inherent limitation of a single case is noted in the study, findings show that there are significant impediments in the implementation process and that the process is strongly influenced by, the socio-technical, structural, and relational constructs foundation the organization. Managerially, the findings provide managers with possible guidelines that suggest important barriers to overcome during enterprise system implementation in various project phases. Theoretically, this paper made two contributions by offering a knowledge integration perspective that sees enterprise system implementation as a process of collective social construction (Berger and Luckmann 1967) which can be influenced by internal participants such as the implementation team, IS staff, users, and top management, as well as external participants, such as suppliers and project consultants. Secondly, the findings provide insights into the nature and dynamics of various complex impediments that underlie many SAP implementations.
2.5 Research Gap
As per the literature survey done for past 10 years, very good research have been done by various researchers in field of SAP for various industries, but very few research have been carried out regarding SAP implementation problems & their solution particularly in field of construction industry.
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Chapter-3 Data Collection
Methodology
Data collection regarding problems & probable risk occurred during SAP implementation in
construction firm is collected through discussion with Mr. Ashwin Oza, SAP consultant at
ADANI SEZ & PORT. Further, In order to achieve the research aims, the study attempted to
seek generalized statements on risks that target construction firms may experience in SAP
exploitation. Therefore, a deductive research design based on a questionnaire survey was
selected. The questionnaire design was based on a risk ontology that was created though a
process of data collected from SAP consultants at ADANI as well as critical literature review.
From this ontology it became apparent that out of the 40 predefined risks, some were related
with business aspects, while the rest focused on technical issues.
In addition, the study attempted to identify which of the 40 predefined risk events would be
perceived by respondents as risks for SAP exploitation, as well as, to assess the importance of
each identified risk according to its likelihood, impact and frequency of occurrence. In order to
achieve these objectives, each of the 40 predefined risk events was examined in the questionnaire
through four questions:
1) Whether this event could be perceived as a risk to SAP exploitation.
(1 = yes, 2= no).
2) What the probability of occurrence of this risk event could be.
(measured on a 3-point Likert scale, ranging from high [3] to low [1]).
3) What level of impact this risk could result in.
(measured on a 3-point Likert scale, ranging from high [3] to low [1]).
4) What the frequency of occurrence of this risk event could be.
(measured on a 5-point Likert scale, ranging from very often [5] to very rarely [1]).
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3.1 SAP Integration at AEL (Adani Enterprise Pvt. Ltd. )
Adani Enterprise Pvt. Ltd. (AEL) is one of the leading trading houses in India. It has been
operating for over 20 years and has the coveted “five star export house” status, which has been
granted only to a few export houses by the government of India. AEL’s business space is
inbound/outbound trade as well as domestic trade in India and it presently accounts for >1 % of
India’s imports and exports. It currently serves ~200 major clients through 17 global offices and
trades in 35 commodities. On the volumes front, its imports are >10 mnmt and exports >2 mnmt.
In FY06, it chartered ~247 ships, underscoring its size & scale of operations. It is one of the
largest players in thermal coal, iron ore, ferrous scrap and edible oils trading. For ensuring high
reliability & short turnaround time, AEL has set up dedicated logistical and handling facilities
for certain commodities like iron ore, coal, grain, fruits and vegetables, etc.
Adani Group – The Diversified Conglomerate
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Adani – FactsOrganization Adani Enterprise Pvt. Ltd.
Industry Diversified Conglomerate
Business Challenge
1. Do this as a single implementation yet focus on
implementation of each company as in isolation
2. Multiple Decision centers & leadership styles
3. Different Organizational objectives
4. Aligning people to a common viewpoint, highest level of
alignment
5. Different Locations
6. Multiple and Disparate legacy systems
7. Tremendous resource crunch
8. Limited experience for such a mammoth
9. Large Team management
10. Massive logistics effort
11. Finding a suitable partner
User Environment
1. 275 Users
Application Environment
SAP EC&O 6.0
1. Accounts Receivable
2. Accounts Payable
3. General Ledger
4. Fixed Assets
5. Job Cost
6. Service and Contract Billing
7. Change Management
8. HR Benefits Administration
9. Payroll
Technical Environment
1. Enterprise / Database Server(s): IBM I Series 860 12 Way
2. Deployment Server: Compaq ProLiant DL380 Dual 730 Mhz
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Intel Pentium III
3. Terminal Servers (7): HP ProLiant BL20p G2 Quad 3065
Mhz
4. Windows Terminal Servers (8): IBM eServer Blade Center.
SAP Implementation Process AT ADANI
3.2 SAP Implementation Requirement
1. Use of best practices to achieve common processes & use of ASAP methodology
2. Single SAP instance for multiple companies
3. Establishment of Central Master Data Cell
4. Integration with back-end systems (i.e. Terminal Operating systems, Port Management
system, Navis…)
5. Mapping of complete range of assets of port & railway infrastructure
6. Single Window service orientation using SAP Portal for SEZ
7. Special Process development for SEZ
8. Central Authorization management service
9. Central Expert implementation and helpdesk team
10. Solution Manager as the focal Helpdesk management tool
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11. Funds Management, Investment Management & Profitability Analysis successfully
implemented
12. Highly scalable server and network architecture setup
3.3 Problems during SAP implementation at Adani
1. Failure to Re-Design Business Processes to Fit the Software.
Avoid customization. Many companies "go to war" with the package and try to make it meet
their business process requirements, only to lead the way to huge cost overruns and project
failure in some cases. Rather than attempting to modify the software, Adani re-engineered their
business processes to be consistent with the software, and this has proved to be critical to the
project's success. It is important to re-design business processes to be consistent with system
specifications. One of the most difficult and time-consuming aspects of the project was the
creation of a "bridge" between the SAP and legacy applications, and this resulted in extensive
time and cost delays. If modifications are necessary, establish an up-front agreement between IT
and user managers with respect to what is to be modified.
2. Insufficient Training and Re-Skilling
Due to the rushed schedule, some modules testing were skipped. Besides, the system was not
properly tested to identify its shortcoming in handling large amounts of orders. There was
inadequate testing and insufficient time to debug the system to ensure its functionality.
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Adani invested heavily in training and re-skilling their developers in SAP software design and
methodology. They gave training to their employee in three stages. Cost for training of each
employee was around 2 lacs but employee were unable to grasp at their pace. Most firms
emphasized the investment in the training, re-skilling, and professional development of the IT
workforce. In the experience of various companies, training costs were higher than expected.
Figure 1 Employees Technical Expertise at Various Stages of SAP Implementation
3. Lack of Senior Management Support
Top management is expected to provide support in the areas of committing to the SAP project,
sufficient financial and human resource, and the resolution of political problems if necessary.
Limited financial support contributed to a rushed SAP implementation process, project team
members were overloaded and thus high staff turnover rate, ineffective knowledge transfer, and
political problems occurred. Insufficient commitment could lead to political problems which
hindered the implementation process (causing poor BPR, widespread user resistance to change
and low user satisfaction). Without question, top management support is critical to the success of
a project. It is important to achieve the support of senior management for accomplishing project
goals and objectives and aligning these with strategic business goals. At the time of ”Go Live”
due to cost and time over run senior management was not supporting the new system.
4. Standardization
Another "risk factor" which is closely associated with the software itself is insufficient adherence
with the standardized specifications that the software supports. Use a common data model and
common data definitions to drive common business processes.
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At Adani they have their vendor names and communication address in different style and formats
so at the time of implementation it was one of the biggest challenges which they face during
system standardization phase.
5. Lack of "Business" Analysts and Retain Qualified SAP Systems Developers
One of the critical workforce requirements for the project was the ability to obtain analysts with
both "business" and technology knowledge. Instead of 200 "programmers" with average skills,
the SAP project demanded and could be accomplished with 20 of the "best and brightest"
analysts. However, retaining these professionals was a significant problem because of their
market value.
At Adani also they face same problem, they train their employee for six months and after
training many employee ran away due to their increased market value.
Strategic Level Management Level
Knowledge Level
Operational Level
0
50
100
150
200
250
825
40
202
818
35
186
0
2813 8
Before TrainingAfter TrainingPercentage Deduction
Figure 2 Firms Employees Status after SAP Implementation
Before Training After Training Percentage DeductionStrategic Level 8 8 0.00
Management Level 25 18 28.00Knowledge Level 40 35 12.50
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Operational Level 202 186 7.92
6. Lack of Integration
In terms of factors conducive to project failure, one of the main factors associated with failure is
lack of integration. The project needs to be based on an enterprise-wide design. You can't start
with "pieces," and then try to integrate the software components later on. It is important to use a
"federal" approach; define what is needed at the enterprise-level, and then apply it to the business
unit level. A phased-in approach is superior to the "big-bang" all-at-once approach.
At Adani Enterprise Port Management system (EPMS) was used for management information
purpose but at the time of implementation problem was that implementation team face problem
during customization, they took around 8 months of time to integrate to new SAP system.
About EPMS (Enterprise Port Management System)
Enterprise Port Management System (EPMS) is an Internet (web) based end-to-end integrated
Port solution from Navayuga Infotech that handles vessel and cargo movement activities in and
out of the port. For better decision making the system provides users with real time information
about vessel arrival / departure, port facilities management, cargo & logistics information, gate
operations, etc. The objective of the application is to get the highest competitiveness by
maximizing the work efficiency, enabling effective usage of port facilities and achieving
customer satisfaction by high quality service. It also provides you with various enterprise based
functional, operational & management modules with seamless integration & interoperability.
EPMS Modules & Features
Marine & Vessel Operations System (MVOS)
1. Berth Definition and monitoring2. Vessel Documentation3. Service Request / Recording4. Marine Closure5. Vessel Dashboard
Cargo & Logistics Management System (CLMS)
1. Import / Export Documentation2. Gate Operations
3. Warehouse Operations4. Control Centre Operations5. Shipping Operations6. Jetty Operations7. Storage Planning8. Weighbridge Integration
Rail Operations Management System1. Rail Documentation2. Exchange Yard Operations3. Placement / Release of Rake4. Indent for Wagons
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1. Wagon Allotment
Human Resource Management System1. Role / Designation Configuration2. Workflow Definition
Material Management System1. Vendor Management2. Procurement Process3. Quotation System4. Purchasing & Invoicing5. Inventory & Stores6. Goods Indent / Receipt / Issue
Customs & EDI1. CHA / Importer / Exporter2. Immigration3. Navy / Coast Guard4. Data Configuration5. Data Transfer6. PCS Messaging Hub
Finance management System1. Rate Card Automation2. Customer Service Agreements3. Automated Invoicing / Billing4. Bill Adjustments5. Cash / Bank Transactions
Administration & User Customization1. Complete port administration for
Port Authorities2. Easy to use web interface3. Easily adaptable to any specific port4. User based Application & Setup
Customizations
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Figure 3 Port Management Information System
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Terminal Operating System
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Figure 4 Terminal Operating System
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7. Lack Of An Integrated Technology Strategy To Support Client-Server Implementation
The different "technology" environments at Adani delays in establishing consistency and
coordination between various company sites. There was problem regarding selection database
management system and operating system environments for the SAP application. For example,
the choice of whether to implement SAP using Unix/Oracle, operating system/database
environment or MVS/DB2 became an issue.
8. Avoid Building Bridges to Legacy Applications
Due to conglomerate business there was requirement to merge various legacy system with new
system, resulting in extensive time and cost delays. It is important to implement a total integrated
package at one time, rather than in pieces. The building of a bridge between a SAP module and a
legacy application was problematic and illustrated the complexity of building a bridge to a
legacy system.
9. Failure to Integrate Add-On Modules with the SAP System
When software does not meet requirements, most firms used bolt on's, or add-on packages which
are offered by third-party vendors. Several project managers emphasized the need to limit the
number of "bolt-on's," or "add-on's," to those which are absolutely critical to accomplishing
project activities.
10. Total Cost of Implementation
Total Cost of Ownership (TCO) of implementation of SAP includes hardware, software,
professional services, and internal staff costs, maintenance & up gradation charges. As explained
earlier at Adani due to employee failure to understand new system there was requirement to
retrain them so ultimately at the time of “Go Live” TCO was doubled then budgeted cost.
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Project Preperation
Bussiness Blue Print
Realization Final Prepera-tion
Go Live & Support
Maintanance
Bud-geted (Rs. In Cr.)
2 7 13 26 36 40
Actual (Rs. In Cr.)
2 8 15 28 42 54
5
15
25
35
45
55
Total Cost At Various StagesCo
st in
Lac
s
Figure 5 Budgeted vs Actual Cumulative Cost of Implementation
11. Operational Deficiencies
• Developing reports is difficult in SAP
• Not all required reports were available at implementation time
• Operational deficiencies that impact the accuracy and efficiency of operations and the ease of
use of the system
• SAP is not sufficiently integrated with other systems
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12. Knowledge Management
• Difficult to retain people with SAP skills due to market pressure to leave
• Insufficient resources and effort put into developing in-house knowledge
• Training provided was inadequate and did not cover the diversity of circumstances encountered
in normal daily operations
13. Organizational Context
• Differences in work ethic among project personnel
• Implementation across multiple agencies led to sub optimization of the system configuration
• Lack of leadership at senior levels
• Lack of ownership/responsibility by agency personnel at the project level
• Political issues had a negative impact on the project
• Poor communication between agencies
• Timing of implement was inappropriate because of change underway in the public sector
14. System Development
• Complexity of SAP means makes overall design decisions very difficult
• Frequency of SAP upgrades places a large burden on system maintenance
• Frequency with which requirements changed caused problems for developers
• Inadequate system testing left many errors in the implemented system
• Issues that arose during, or result from, the development phase of the SAP system
• Requested system functionality was sacrificed in order to meet implementation deadlines
• Shared knowledge among project team members was a problem - agency staff did not
understand SAP and implementation personnel did not understand agency requirements
• System documentation is inadequate, particularly with respect to system design and controls
• The project team was disbanded when the system was handed over despite many issues
remaining unresolved
• Too little effort put into redesigning the underlying business processes, resulting in a system
that represented a“technology swap” that failed to capture many of the benefits of SAP.
Now based on the above information and literature review one questionnaire has been
prepared to identify most important risk in SAP implementation.
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3.4 SAP Implementation Risks
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SAP implementation
RiskOperationalRisk (OR)OR 1 In general
OR 2 Sales and marketing area
OR 3. Material & Production Area
OR 4 Financial & Accounting Area
Analytical Risk (AR)AR1. In General
AR2. Sales and marketing area
AR3. Purchase and productionarea
AR 4. Financial & Accounting Area
Organisation-Wide Risk(OWR)OWR 1. Top Management
OWR 2. SAP Planning
OWR 3. In house Expert
OWR 4. System Users
OWR 5. System Vendor & Consultant
TechnicalRisk(TR)TR 1. System Integration
TR 2. System Faults
TR 3. System Maintanance
3.4.1 Operational Risk
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OR 1 In General
OR1.1 - Operational staff are reluctant to use the
systemOR1.2- Operational staff input incorrect data to the system
OR 2 Sales & Marketing Area
OR2.1-Sales staff are not able to obtain needed data and information from the system
OR2.2-Fail to maintain up-to-date and comprehensive customer info files
OR 3Material & Production Area
OR3.1- System contains inaccurate supplier records
OR3.2- System contains inaccurate or incomplete bill of materials
OR3.3- System contains inaccurate inventory records
OR 4Financial & Accounting Area
OR4.1- Accounting staff are unwilling to release accounting responsibility and power to non-account staffs
OR4.2- Non-accounting staff are unwilling/incapable to take up accounting responsibilities.
3.4.2 Analytical Risk
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AR 1 In General
AR1.1Front-line managers refuse to use the
system
AR1.2Managers cannot retrieve relevant and
needed information from the system.
AR 2 Sales & Marketing Area
AR2.1- Fail to use the system to generate accurate sales forecasts.
AR2.2- Fail to utilise the system to predict demands of new products.
AR2.3 System fails to support sales personnel to provide special sales promotion to existing customer.
AR 3Purchase & Production Area
AR3.1- System fails to generate appropriate master production Schedule
AR3.2- System fails to generate appropriate material net requirement plan.
AR 4Financial & Accounting Area
AR4.1- Fail to use the system to generate appropriate financial budgets.
3.4.3 Organizational Risk
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OWR1Top
management
OWR1.1- Top managers make important IT decisions without consulting IT experts and system users.
OWR1.2- Substantial personnel change in the top management team.
OWR1.3- Top managers do not provide sufficient support to ERP post-implementation.
OWR 2 ERP
Planning
OWR2.1- ERP development plan is missing, ill-defined or misfit with business strategy
OWR2.2- Direction for further ERP improvement and development is unclear
OWR2.3- Budget and fund assigned to ERP post implementation is in
sufficient.
OWR 3In house
Specialists
OWR3.1- Fail to form an efficient cross-functional team to continuously review the system.
OWR3.2- Lose qualified SAP experts
OWR3.3- Lose ERP-related know-how andexpertise accumulated over time
OWR 4SystemUsers
OWR4.1 Users (both staff and managers) do not receive sufficient and continuous trainingOWR4.2Users are uncomfortable to input or retrieve data from the systemOWR4.3ERP related problems are not reported promptly by system usersOWR4.4Data access right is authorised to inappropriate usersOWR4.5Confidential data is accessed by unauthorised people
OWR 5System Vendors& Consultants
OWR5.1Cannot receive sufficient technical support from system vendors
OWR5.2Cannot receive sufficient and proper consulting advice from system consultants
3.4.4 Technical Risk
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TR 1 System Integration
TR1.1 Different modules of the ERP system are
not seamlessly integrated.
TR1.2 Legacy systems are not compatible with
new ERP systems.
TR 2 System Faults
TR2.1 Invalid data is not automatically
detected when getting into the
system.
TR2.2 Hardware or software crash.
TR 3System Maintanance
TR3.1- Technical bugs of the system are not
overcome speedily.
TR3.2- Outdated and duplicated data is not
properly managed.
TR3.3- System is not properly modified to meet
new business requirements.
Chapter-4 Data Analysis
The results of questionnaire show that all of the 40 risks, which were pre-defined in the risk
models, were confirmed by the majority of respondents as risk events to SAP implementation.
However, perceptions of impact and probability of occurrence varied somewhat.
The survey asked respondents to assess the importance of each risk from three aspects.
1. Probability of occurrence,
2. Impact and
3. Frequency of occurrence.
The mean was used in this study to provide a summary of responses associated with the
likelihood, impact and frequency of each identified risk (as presented in Appendix A). The
respondents have subsequently prioritized the 40 identified risks based on their means of
likelihood and means of impact. The top ten risks ranked by their means of likelihood are
presented in table 1. The top ten risks ranked by their means of impact are presented in table 2. A
third set of ranks based on the frequency of occurrence of each risk was neglected, because this
seemed to be less important and relatively redundant.
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Table 1 Top Ten SAP risks ranked by mean of likelihood
Rank Code Risk Item Mean Of Likelihood
(L)1 OWR 5.1 Cannot receive enough technical support from system vendors 2.0
2 TR 1.2 New system is not able to integrate with other legacy system 1.98
3 AR 1.2 Managers cannot receive needed information from system 1.95
4 TR 3.2 Outdated and duplicated data of SAP is not properly discarded 1.95
5 OWR 5.2 Cannot receive proper consulting advice from system consultants 1.95
6 OR 3.3 SAP system contains inaccurate inventory records 1.93
7 AR 2.2 Fail to use SAP to predict actual demands of new products 1.93
8 AR 4.1 Fail to use the system to generate appropriate financial budgets 1.93
9 TR 1.1 Seamless integration is not achieved between modules of SAP 1.93
10 TR 3.3 SAP is not properly modified to meet new business requirements 1.93
Table 2 Top ten SAP risks ranked by mean of Impact
Rank Code Risk Item MEAN
OF
IMPACT
(i)
1 OR 1.2 Operational staff input incorrect data into the system 2.44
2 AR 3.2 System fails to generate appropriate material net requirement plan 2.30
3 OWR 4.5 Confidential data of the system is accessed by unauthorized people 2.29
4 OR 3.2 SAP system contains inaccurate or incomplete bill of materials 2.28
5 OR 3.3 SAP system contains inaccurate inventory records 2.27
6 AR 3.1 Master production schedule generated by the SAP system is irrelevant
2.27
7 OWR 1.1 Top managers make important IT decisions without consulting IT experts
2.27
8 OWR 2.1 IS/SAP plan is missing, ill-defined or misfit with business strategy 2.18
9 AR 2.1 Sales forecast generated by SAP is inaccurate and inappropriate 2.17
10 OR 2.2 Customer info files contained in SAP are out-of-date or incomplete 2.15
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It is however apparent that the top ten risks presented in table 1 are not the same as those
presented in table 2. In other words, an identified risk that had a high mean of likelihood might
not have a high mean of impact, and vice versa. This was to be expected and shows a clear
awareness of the respondents that there was a clear difference between frequency of a risk and
critical impact of the same risk. This is a well known phenomenon in IS. In fact, from the risk
management perspective, both likelihood and impact should be considered simultaneously rather
than separately when assessing the identified risks. The highest priority should be given to risks
that have both a high likelihood and a high impact. Very often frequent risks are not critical and
therefore are considered to be acceptable risks by the organization. On the other hand, critical
risks, even if they only occur very infrequently may be considered as un-acceptable risks to take
and need a number of risk management mechanisms in place to both mitigate and resolve them.
Finally, it is evident that risks that are both critical and frequent need to be addressed with the
highest priority as they often become non-manageable and therefore extremely dangerous for the
organization.
As a consequence, instead of looking at their likelihood and impact separately, this study
identifies and discuses a set of most critical risks by examining both their means of likelihood
and means of impact. In other to do so, first of all average of the means of likelihood of the 40
identified risks has been calculated: 1.83, as well as, calculated the average of their means of
impact: 2.04. The study identified that there were 16 risks, of which the means of likelihood and
the means of impact were both higher than the average level of the 40 risks. In contrast, the
remainder 24 risks had either a low mean of likelihood or a low mean of impact (i.e. lower than
the average level). It is thereby reasonable to state that, in comparison to the other 24 identified
risks, these 16 risks (as shown in table 3) seemed to be more significant and thus should receive
a higher priority. Since all of these 16 risks had a high mean of likelihood and a high mean of
impact, they should consider as risk. Therefore no further ranking was made to priorities these 16
risks.
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Table 3 Top 16 SAP exploitation risks
Rank Code Risk Mean
of (L)
Mean
of (I)
operational OR 2.2 Customer info files contained in SAP are outdated or incomplete 1.88 2.15
Risk OR 3.2 SAP system contains inaccurate or incomplete bill of materials 1.83 2.28
OR 3.3 SAP system contains inaccurate inventory records 1.93 2.27
Analytical AR 2.1 Sales forecast generated by SAP is inaccurate and inappropriate 1.85 2.17
Risk AR 2.2 Fail to use SAP to predict actual demands of new products 1.93 2.10
AR 3.1 Master production schedule generated by SAP is inappropriate 1.80 2.27
AR 3.2 System fails to generate appropriate material net requirement plan 1.85 2.30
AR 4.1 Fail to use the system to generate appropriate financial budgets 1.93 2.10
Organizational OWR 2.1 IS/SAP plan is missing, ill-defined or misfit with business strategy 1.83 2.18
RISK OWR 2.2 Direction for SAP improvement and enhancement is unclear 1.85 2.08
OWR 3.2 Lose qualified IT/SAP experts 1.83 2.05
OWR 3.3 Lose SAP-related know-how accumulated over time 1.90 2.10
OWR 5.1 Cannot receive enough technical support from system vendors 2.00 2.05
Technical TR 1.1 Seamless integration is not achieved between modules of SAP 1.93 2.05
Risk TR 1.2 SAP system is not able to seamlessly integrate with other information systems
1.98 2.04
TR 2.2 Hardware or software crashes 1.88 2.05
This means that critical risks seem to be found across the organizational processes and not
conveniently localized around one category, namely not around the technical category.
Therefore, this study seems to confirm that failure of SAP systems may not just be conveniently
related to the technical infrastructures and software packages. Actually, what this study confirms
is that it is in operational, management and strategic thinking areas that the majority of risks
were identified.
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Table 4 SAP Risk Mitigation Strategies
Risks Strategies for SAP risk managementUser
involvement
and
training
- Communicating users about project strategy and objectives
- Classifying users on the basis of their experience & skill set and assigning them
appropriate roles.
- - Effectual training strategy for different roles.
- Upgrading existing skill set to meet the requirements.
Project
managemen
t
- Strategies for recruiting and retaining technical personnel
- Model based implementation strategy.
- Check on budget and time requirements at each stage of project.
- Attain top management commitment to redesign business processes
- Defining levels and hierarchies in organization for effective decision making.
Technology
Implementa
tion
- Strategy for migration and data conversion from existing legacy system tonewly
designed system.
- Maintain log of software bugs and transaction failures.
- Simple training strategy for even very complicated modules.
System
Design
- Design should check process fragmentation.
- Strategy for migrating from existing software version to new version.
- Design should meet business plan criteria and adequately mirror required
processes.
- Use Object- and component- oriented techniques in system design.
- COM/SOM/OMA/OMG object models can be used make object definition in
dependent of programming language.
- System architecture should support partitioning of application on different
computers.
Integration
and
Technology
planning
- Carefully select operating system and network capacity keeping in mind the user
requirement and transaction loads.
- Record of technical problems with new system.
- Client-Server / Distributed Network implementation based on object
communication.
- Object communication can be implemented through CORBA or OLE.
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Chapter 5 Conclusion
5.1 Recommendation
It emanates from the above study that SAP system links together organizational strategy,
structure and business processes with the IT systems. It is important to communicate what is
happening, including the scope, objectives and activities of the SAP project. Similarly
appropriate staffing and personnel shortfalls need to be checked carefully. In case of inadequate
internal expertise, it is recommended that organization should hire consultants for technical and
procedural challenges in design and implementation of specific application modules. Instead of
large number of programmers with average skills, it would be better to have few business
consultants those who have specialized expertise in their specific domains. It is very important to
create a perfect project management plan keeping in mind the project size & structure, skill set
available, experience of the company, etc. to avoid high project cost and time over runs. System
design is highly dependent on client server/ distributed network implementation and object
oriented methodology used in various modules and components designs.
The various strategies for mitigating as well as for managing SAP risks have been listed in table.
5.2 Conclusions
To conclude the study, it may be emphasized that user involvement, user training, project
management, technology implementation, system design, integration and technology planning
are the key issues which are the critical risk factors in SAP design and implementation. A
meticulous planning of these issues would surely help in smooth and successful implementation
of SAP systems in any organization in general and in the selected organization in particular.
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Appendix- A
Means of Likelihood, Impact and Frequency of the 40 identified riskCode Risk Item Mean of
likelihoodMean of Impact
Mean of
frequency
Operational Risks
OR 1.1 Operational staff are unwilling to use the SAP system 1.45 2.03 2.03
OR 1.2 Operational staff input data into the system 1.12 2.44 1.61
OR 2.1 Sales staff are not able to obtain data and info they need from system 1.71 2.00 2.44
OR 2.2 Customer info files contained in the SAP system are out of date. 1.88 2.15 2.35
OR 3.1 SAP system contains inaccurate supplier records. 1.80 2.02 2.41
OR 3.2 SAP system contains inaccurate or incomplete bill of materials. 1.83 2.28 2.15
OR 3.3 SAP system contains inaccurate inventory records. 1.93 2.27 2.49
OR 4.1 Account staff are unwilling to release accounting response to other 1.70 1.81 2.11
OR 4.2 Non account staff are unwilling and in capable to take up response. 1.38 1.54 2.06
Analytical Risks Mean of likelihood
Mean of Impact
Mean of
frequencyAR 1.1 Front line managers refuse to use SAP system 1.35 1.85 1.75
AR 1.2 Managers cannot receive required information from system 1.95 1.98 2.48
AR 2.1 Sales forecast generated by SAP is inaccurate and inappropriate 1.85 2.17 2.29
AR 2.2 Fail to use SAP to predict actual demand of new products 1.93 2.10 2.38
AR 2.3 System fails to support sales personnel to tailor special offers 1.73 1.71 2.10
AR 3.1 Master production schedule generated by SAP is inappropriate 1.80 2.27 2.34
AR 3.2 System fail to generate appropriate material requirement plan 1.85 2.30 2.33
AR 4.1 Fail to use the system to generate appropriate financial budget 1.93 2.10 2.32
Organization Wide Risk
OWR 1.1 Top managers make imp. IT decisions without consulting IT experts. and system users.
1.46 2.27 1.90
OWR 1.2 Substantial personnel change in the top management team. 1.89 1.89 2.53
OWR 1.3 Top managers do not provide sufficient support to new system 1.60 2.05 2.12
OWR 2.1 SAP development plan is missing, ill-defined or misfit with business strategy
1.83 2.18 2.45
OWR 2.2 Direction for further SAP improvement and development is unclear 1.85 2.08 2.65
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OWR 2.3 Budget and fund assigned to SAP post implementation is in sufficient
1.55 1.93 2.43
OWR 3.1 Fail to form an efficient cross-functional team to continuously review the system.
1.85 2.03 2.59
OWR 3.2 Lose qualified SAP experts 1.83 2.05 2.57
OWR 3.3 Lose SAP-related know-how and expertise accumulated over time 1.90 2.10 2.43
OWR 4.1 Users (both staff and managers) do not receive sufficient and continuous training
1.80 1.83 2.59
OWR 4.2 Users are uncomfortable to input or retrieve data from the system 1.89 1.82 2.53
OWR 4.3 SAP related problems are not reported promptly by system users 1.83 1.98 2.50
OWR 4.4 Data access right is authorized to inappropriate users 1.24 2.12 1.76
OWR 4.5 Confidential data is accessed by unauthorized people 1.29 2.29 1.64
OWR 5.1 Cannot receive sufficient technical support from system vendors 2.00 2.05 2.59
OWR 5.2 Cannot receive sufficient and proper consulting advice from system consultants
1.95 1.98 2.46
Technical Risk Mean of likelihood
Mean of Impact
Mean of
frequency
TR 1.1 Different modules of the SAP system are not seamlessly integrated.
1.93 2.05 2.41
TR 1.2 Legacy systems are not compatible with new SAP systems. 1.98 2.04 2.48
TR 2.1 Invalid data is not automatically detected when getting into the system.
1.83 1.98 2.28
TR 2.2 Hardware or software crash. 1.88 2.05 2.33
TR 3.1 Technical bugs of the system are not overcome speedily. 1.90 1.98 2.44
TR 3.2 Outdated and duplicated data is not properly managed. 1.95 1.98 2.46
TR 3.3 System is not properly modified to meet new business requirements.
1.93 2.0 2.32
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